Co-op to Condo Conversion: Understanding the Growing Trend

Last summer, a financially beleaguered 47-unit cooperative at 30 West 90th Street in Manhattan made news when it converted to condominium status. That was not the first time a co-op converted to condo. A Teaneck, New Jersey co-op underwent the process two decades ago, and others—although not many—have done likewise over the years. But, it was the first time ever for such a metamorphosis in New York State.

The concept of co-op to condo conversion has garnered a lot of attention since the reconstitution of 30 West 90th Street, not only because it was an historic event but more significantly because of what happened immediately afterward. Before the conversion, "We had a substantial amount of leverage on a property that had depreciated significantly during the real estate market downturn," says John Kaplan, who was board president during the conversion.

"Apartments were virtually unsalable, a lot of people were forced to move out and sublet because they couldn't sell their apartments, and we were looking for a way to increase the liquidity of the apartments and to establish a less transient universe." Apparently, conversion to condo was the answer.

Within three months of the conversion, which Kaplan estimates took about two years and cost the co-op around $100,000, 15 units were sold where none had been sold for six years prior, average sales prices increased to market rate where they had previously been considerably below, and the monthly carrying costs decreased an average of 20 percent from what they had been when the building was a co-op.

Says Kenneth R. Jacobs, partner in the Manhattan law firm of Smith, Buss & Jacobs, LLP, and the attorney who represented the shareholders in the conversion process, converting co-ops to condos may be "the next evolution of a maturing market."

Read More...

Related Articles

Recent Changes to Co-op & Condo Laws

Managing the Impact on Your Community

Waldorf Astoria Condo Conversion Continues

Project Gears Up Despite Owner's Financial Issues

Waldorf Condos to Hit Market This Fall

Beijing-Based Developer Moves Ahead With Conversion

 

12 Comments

  • Very interesting info, but how to obtain more info such as tax differences??
  • I am interested in converting our buiding from co-op to condo; I need a co-op to codo atty.
  • Very Interesting; I need the procedures to convert to condo. Thank you 2-7-08
  • I'd like to know how to obtain a list of companies who specialize in buying apartments and converting them into condos, as we have a property listing that we think would be perfect for that. We want to market this to those companies. Can anyone help? My email is jeremy.godwin@grubb-ellis.com
  • We would like to convert our coop to a condo but are concerned about the Capital Gains Tax which for us might be $60K per apartment. Does anyone know anything about the bill in Congress mentioned above which might eliminate this? Ed
  • 26 USC 216(e) now provides that a distribution of a dwelling unit in exchange for the stockholder's stock in the co-op is no longer a taxable event, if the unit is the cooperator's primary residence. For those who are subletting their apartments, why would this not be a 1031 like-kind exchange? In the alternative, perhaps the co-op corporation could stay in existence and would own the condominium units and appurtenant undivided interests.
  • l live in acoperatve the mortgage pay of is 12/2011 en we have to vote to convenrsion in condo can you tell me wich one is better for me
  • If two thirds of the shares vote to convert from coop to condominium must the other 1/3 be forced to agree, especially if the plan provides with replacing the underlying mortgage with individual mortgages whereby the common charges, mortgage payment and individual taxes are equal to or less than present maintenance for the unit?
  • There are murmerings of the process for our coop, and we have no underlying mortgage (which I understand is fantastic) so i wonder how that will work out?
  • What if there is no mortgage on the coop itself and none of the shareholders hold mortgages. I live in a small coop outside of NYC (11 units) 9 buildings. There are no debts on the property - would conversion to condo be less expensive in a case like this?
  • When you own a unit in a co-op are you on title?
  • for co-op apartments that are not used as a primary residence by owner/shareholder, at what tax rate must the co-op corporation pay tax when the property converts to condo and on what amount of money --- if the apartment is appraised at $1 million would the corporation have to pay state and federal corporate income taxes on $1 million?